October 2016

The road ahead

In a market brimming with possibilities, Tata Motors Indonesia has established the right kind of base in the country to help it pave the path to sustained well-being

With a sturdy brand and adequate resources for backing, setting up to do business in an inviting foreign land should be a breeze for any knowledgeable company, right? Not a chance, as Biswadev Sengupta, for one, knows from experience.

Back in April 2012, Mr Sengupta and a few of his colleagues arrived in Indonesia to begin the process of establishing Tata Motors Indonesia (TMI) as a subsidiary of Tata Motors, the mother enterprise, in the country. “We had to start from scratch, from finding a place to call an office to recruiting local employees, from buying stationery and cutlery to everything else,” he says. “It was tough but it was exciting. It was fun and there was so much learning to be had.”

This was a time when Tata Motors had decided to have its own operations in Indonesia through a fully owned subsidiary. Third-party distribution has been the chosen business model for the company in most international markets where it has a presence, but Indonesia would be different. A fully owned subsidiary made better sense in a country with rosy potential. The reality of putting together the subsidiary and giving it the legs to run would prove less fragrant than the projections.

Going it alone
“We did not have any roots here and we did not have the luxury of a local partner to help with the initial transition,” says Mr Sengupta, the president director of TMI. “Indonesia was the first country where we rolled out the full subsidiary arrangement. We had to do it all on our own and it’s not easy building an operation from the ground up in a foreign geography.”

The affable Mr Sengupta, who joined Tata Motors in 1992 straight after completing his graduation from the Regional Engineering College in Silchar (in Assam in India), was well-equipped for the task. He had served as the Tata Motors country manager in Sri Lanka and as regional head for South Asia. Indonesia has proved to be a different kind of challenge.

The preliminary TMI team comprised expatriate Indians in the main. “We began with a bunch of 17 colleagues who had come down from India to kick-start the operation,” says Mr Sengupta. “We then recruited Indonesian teammates and gradually this group has expanded. We have now got good hands from different industries and we have gradually reduced the number of Indian employees from a high of seventeen to seven.”

Local flavourTMI’s people strength is 51 today and 44 of them are Indonesians. Increasing the local flavour was, in terms of talent, the intent from day one. “The idea always was to hand over more and more responsibility to our Indonesian colleagues,” says Mr Sengupta. “They have got settled and they have got comfortable and competent with the brand and our processes. Moreover, they have brought in local knowledge, culture, experiences and immense zest to the business.”

Mr Sengupta is emphatic that even though TMI is a component of Tata Motors, the subsidiary will, in the longer term, be a local entity run by Indonesian managers. “There will be a few Indians to act as guides and to be a bridge between TMI and Tata Motors in India, but the basic operations are best managed by Indonesians themselves. The process of organisation building continues, though, as these are still early days for us.”

Commercial vehicles are the priority for TMI in Indonesia (passenger car sales have been placed on the backburner for now). Besides its headquarters in south Jakarta, the subsidiary has a clutch of satellite locations as part of its marketing and distribution network. Within Jakarta, it has a pre-delivery inspection (PDI) centre, a spare parts warehouse and a training hub for local mechanics. These are essential elements for an operation that remains absorbed in winning over customers not entirely familiar yet with Tata Motors and what it brings to the road.

“We import fully built-up vehicles from India — we haven’t started manufacturing locally — and the PDI centre is where they land up and where the checking and inspecting happens,” explains Mr Sengupta. “The spare parts warehouse is important because the availability of spares is among the doubts a new customer has.”

The Tata Motors Indonesia team at the organisation’s headquarters in Jakarta

TMI has overloaded its hand in the matter of spares. It has a 24x1 parts programme wherein customers are guaranteed a replacement part within 24 hours of a problem surfacing. Any further delay and the spare part is delivered free of cost. “We wanted to make a statement from the very start,” says Mr Sengupta. “We wanted our customers to have confidence in us.”

The training centre under the TMI canopy involves educating Indonesian mechanics about Tata Motors’ products and how to attend to them. “These mechanics are engaged with our dealers and with our workshop network,” says Mr Sengupta. “Even if the customer is in a far-off place, he has access to a skilled worker who knows the vehicle. The two principal concerns in customer minds are spare parts and the availability of mechanics. We have got both these issues covered.”

Besides the Jakarta area, TMI has satellite offices in the port city of Surabaya, the second-largest metropolis in Indonesia, and in Medan, which ranks right behind in size and population. It has 20 dealer outlets, each selected with care and purpose. “We were clear from the beginning that we will not go about opening dealer points recklessly,” says Mr Sengupta. “There were a lot of enquiries for dealerships when we got in, but we wanted to be certain on two points: the commitment of our business partners and how competent their after-sales support infrastructure was.”

Learning to improve
From Jakarta, TMI has moved to other places in Java and to Bali. “Indonesia is a collection of numerous islands but business mainly happens in five-six of them,” adds Mr Sengupta. “We have learned as we have gone along and we have made the necessary improvements. Last year we moved to Sumatra, where the commodity business is centred, and once again we have picked experienced, fire-in-the-belly partners. We don’t want to compromise on customer care.”

TMI has sold some 3,000 commercial vehicles in Indonesia since launching in September 2013. That may seem like meagre pickings but its significance revolves around laying a solid foundation for the business in a place where breaking through is an exacting task, especially in the face of competition from Japanese automotive multinationals with deep roots in the region and deeper pockets.

Like in India, the majority of the business that Tata Motors garners in Indonesia is from the country’s smaller towns and in the hinterland. That means TMI has to have a broad-based support network for its automobiles.

“Commercial vehicles travel everywhere,” explains Mr Sengupta. “We may be selling in Medan but the vehicle will go all over the place. We should be in a position to provide support to these vehicles wherever they are and that cannot happen only with our dealership workshops. That’s why, apart from the 20 dealerships, we have 69 other workshops (through a tie-up with Castrol). We will not be found wanting on this count.”

TMI has tried to make up for the lack of time-tested support systems for its vehicles by going the extra mile on backing its customers. It has a 24-hour call centre and a ‘peace of mind’ programme, which assures spares supply, best-in-class warranty and 24x7 on-road assistance.

Such initiatives are critical if TMI is to make a serious dent in the Indonesian market. There are 40 automotive brands in the country and more than 95 percent of the market is dominated by Japanese brands, with the South Koreans, Chinese, Americans and Europeans nibbling on what’s left.

TMI began in 39th position and it is now at 16th, and seventh among commercial vehicles. “We have moved ahead of most of the non-Japanese brands, but the bad news is that the market here has declined with the economy taking a hit,” says Mr Sengupta. “The Indonesian economy is dependent on commodity prices and these have been hit hard in recent times.”

The slide is not about to get TMI down. Its small commercial vehicles and pickups — especially the Super Ace — have been faring well, buoyed by the fact that it is the sole player in Indonesia with diesel technology in its products. “We have made steady progress and we are moving into Ultra light trucks and Prima heavy trucks,” says Mr Sengupta, “and we have serious opportunities in defence vehicles, where Tata Motors has proven strengths.”

Two solid goalsThere are two solid goals for TMI in Indonesia, asserts Mr Sengupta: getting into the top ten among automotive brands and becoming the largest market for Tata vehicles outside of India. “We have a whole lot to work to do but I believe that in about five years we can realise our objectives. We ought to be selling 20,000-odd vehicles in a year. Those numbers may look unrealistic from where we are right now, but that’s where we want to reach.”

The cultural bit in finding the right equation in business is as crucial as any. “I always tell my colleagues, be they Indian or Indonesian, that this is a local company,” says Mr Sengupta. “Our Indonesian colleagues are our face in the market and our customers feel more comfortable due to that. There is no dearth of local talent; the challenge is attracting the best of them to us.”

Mr Sengupta, an optimist with a cheery outlook on people and places, has relished his stint in Indonesia, not least because the country is about as close to home as it can get. “There are more similarities between Indonesia and India than differences. Indonesia is also a diverse country, full of different cultures and blessed with people who accept you and allow you to integrate into their society. I’ve never felt like an outsider here.”

Betting big

Andi Kosala has the sunniest smile in Jakarta and kind words aplenty for those he does business with. The bright visage and the compassionate viewpoints don’t detract from the attributes he uses to guide, and get the best bargain for, the enterprise he heads, Jawa Indie Motor (JIM).

Housed in a heritage building in Jakarta, JIM is among the most crucial dealers for the commercial vehicles that Tata Motors Indonesia markets in the country. Mr Kosala has another dealer (Jawa Motor) for the defence vehicles that the company makes. As the company’s first dealer in the country, Mr Kosala is betting big on Tata Motors and with good reason.

“Tata Motors has made a fine start in a country where it’s not easy selling commercial vehicles, given the competition from Japanese manufacturers,” he says. “Add to that the economic downturn in Indonesia, which has hurt automotive sales.” Mr Kosala is far from discouraged by the negatives. “Tata vehicles are good from the product perspective and that’s an advantage,” he says. “The company has shown the commitment to back up its stated intention of making the Indonesian market the largest for its vehicles after India. Also, it has got 20 dealers here in a short time and that’s impressive.”

Mr Kosala believes there is great scope for Tata Motors in Indonesia. “We need to be persistent and persevering. As long as we pull in one direction, things will work out.”

Tata Motors means more than merely business for Mr Kosala. “I have known their people since 2009 and I’ve helped with connecting them to government officials in Indonesia,” he says “There is a psychological bond, shall I say, that has developed. I went to India and I saw the Tata Motors plant in Pune. I was amazed by the scale of the operation.”

What also stays in Mr Kosala’s memory from that visit is the traffic and conduct on Indian roads. “Such a lot of honking and crazy driving — its worse than Jakarta, which for all the jams is much more orderly.”